Trends For Financial Institutions will be explained in this article. The year 2023 will be difficult for financial organizations. The financial services industry is being redefined by cutting-edge new technologies, which are also influencing the services that financial organizations provide, how they engage with customers, and how they utilize new data sources across departments. But as economic instability spreads, it is endangering entire markets and posing a threat of escalating uncertainty for both lenders and debtors.
4 Trends For Financial Institutions To Watch In 2023
In this article, you can know about 4 Trends For Financial Institutions To Watch In 2023 here are the details below;
However, the development of banking services is expected to go on. Let’s look at the top 4 trends affecting financial institutions in 2023:
- The future will be dominated by open finance
- Legacy tools will be replaced by cloud-native ones.
- Machine learning (ML) and artificial intelligence (AI) will become more significant.
- Cybersecurity is still of utmost importance.
1. Open Banking will dominate the future
The number of open banking users worldwide “is anticipated to increase at an average annual rate of nearly 50% between 2020 and 2024, with the European market being the largest,” according to Statista. Given the advantages that open data offers to both financial players and customers, it is simple to see why this trend will gain popularity over time. Organizations can better comprehend how consumers behave, what they want, and most importantly, what they need, by giving third parties access to their financial data. By enhancing the customer experience, financial institutions can increase consumer engagement and retention.
PWC states that the following retail client propositions will be made possible or improved by open banking:
- Account aggregation offers a unified picture of accounts from various banks.
- Financial management tools that use data analytics to pinpoint expenditure trends and increase savings and budgeting efficiency
- Customized product offerings based on transaction history, such as vacation loans based on reservations for flights and hotels and expected spending
- improved access to financial data will increase the availability of loans for “thin-file” customers.
- PwC claims that a £7.2 billion revenue potential has been created by Open Banking. Financial organizations are starting to take action as they seek to seize this chance. In 2021, 47% of institutions created Open Banking APIs, and another 25% did the same in 2022. Political initiatives like President Biden’s Executive Order on Promoting Competition in the American Economy have also contributed to this progress.
By 2023 and beyond, Open Banking is predicted to rule the financial services industry.
2. Could-native systems will replace legacy alternative
Leading banking institutions still favor cloud-native technologies. For instance, HSBC inked a long-term agreement with Amazon Web Services in 2020 to migrate their current legacy functions to fresh cloud-based substitutes. Another example is Deutsche Bank, which collaborated with Google to provide a cloud-native “fully-managed environment for applications”. However, why is the cloud so crucial? The use of cloud-based systems, according to IBM, can increase agility, lower operational and IT costs, and help workers be productive even when working from home.
This final aspect is particularly crucial. In fact, 90% of workers polled by Loom believe that hybrid working is the way of the future because it gives them more flexibility. Employees can obtain crucial financial data at any time and from any location by utilizing cloud-native systems. Financial institutions can consistently deliver high performance and significantly raise employee and customer happiness by utilizing cloud-native capabilities.
Additionally, faster new feature development and automatic upgrades are made possible by cloud-native design and systems. (instead of disruptive updates that require downtime).
3. Artificial intelligence and machine learning will increase in importance
Organizations become more effective and efficient thanks to machine learning (ML) and artificial intelligence (AI). Massive databases can be gathered, sorted, and analyzed quickly and almost error-free by these technologies. Instead of wasting time and effort manually sifting through the data, financial organizations can spend their time acting on these data-driven insights.
According to IDC, 25% more productivity will be achieved by 2026 thanks to 85% of organizations using AI and ML in some way to improve their foresight. One excellent example is low-code/no-code AI, which enables non-programmers to create apps on their own. While Forrester stated that the low-code/no-code industry spending was on pace to reach about $21 billion by this 2022, Gartner stated that “low-code tools will make up 65 percent of all app development by 2024”. One thing is certain: AI and ML will continue to gain importance in the future, whether they are used to personalize service offerings, comprehend customer behavior more fully, or lower errors.
4. Cybersecurity will become a top priority
Financial organizations have always placed a high priority on cybersecurity. The number of data breaches up until September 30, 2021, however, is 17% higher than the overall number of events in 2020, making it a greater concern than ever. The effects of these cyberattacks on organizations are extensive. In actuality, 42% of companies claim that cybercrime hinders growth and their expansion into new channels.
Financial institutions are especially vulnerable to cybersecurity breaches. For hackers, their customers’ financial and individually identifiable information (PII) is extremely valuable, and security flaws could cost the bank a significant number of customers as well as money.
So in 2023 and beyond, financial organizations must prioritize cybersecurity. They must not only streamline their own internal procedures but also be choosy in their choice of third parties, choosing only those who prioritize data security in all aspects of their operations.
A make-or-break year ahead
The financial services industry is changing quickly. The four trends mentioned above will hasten this development and fundamentally alter the sector over the next 12 months. Financial organizations cannot afford to lag behind, even temporarily, due to the rapid speed of change. The best way for financial players to future-proof their company is to collaborate with creative partners who comprehend and adopt new technologies and trends.